Tanen v. Sw. Airlines Co.

• Decision Date: 26 August 2010
• Docket Number: No. B217818.,B217818.
• Citation: 114 Cal.Rptr.3d 743,187 Cal.App.4th 1156
• Court: California Court of Appeals Court of Appeals
• Parties: Mitch TANEN, Plaintiff and Appellant, v. SOUTHWEST AIRLINES CO., Defendant and Respondent.

187 Cal.App.4th 1156

114 Cal.Rptr.3d 743

Mitch TANEN, Plaintiff and Appellant,

v.SOUTHWEST AIRLINES CO., Defendant and Respondent.

No. B217818.

Court of Appeal, Second District, Division 4, California.

Aug. 26, 2010.

Gutride Safier, Adam J. Gutride, Seth A. Safier, San Francisco, and L. Jay Kuo for Plaintiff and Appellant.

Morrison & Foerster, Jane H. Barrett, Ruth N. Borenstein, and Teri M. Stein, Los Angeles, for Defendant and Respondent.

SUZUKAWA, J.

Plaintiff and appellant Mitch Tanen (Tanen) bought a $100 travel certificate from defendant and respondent Southwest Airlines Co. (Southwest) in February 2005. He attempted to redeem it 14 months later, after its stated expiration date. When Southwest refused to honor the travel certificate, Tanen sued, asserting that the expiration date violated Civil Code section 1749.5, which makes it unlawful to sell a gift certificate that contains an expiration date. Southwest demurred, contending that Tanen's claims werepreempted by the federal Airline Deregulation Act (ADA). (49 U.S.C. § 41713.) The trial court agreed and sustained the demurrer.

We affirm. For a claim to be preempted by the ADA, two things must be true: (1) the claim must relate to airline rates, routes or services; and (2) the claim must derive from the enactment or enforcement of state law. Here, both prongs of this test are met. First, Tanen's claims relate to "services" because they concern Southwest's sale of gift certificates that can be used to purchase airline travel. Second, his claims derive from state law because it is on a California statute, Civil Code section 1749.5, that Tanen bases his claim that the expiration date on the face of the gift certificate is unenforceable. We thus agree with the trial court that Tanen's claims are preempted by the ADA.

FACTUAL AND PROCEDURAL HISTORY

Tanen filed the present action against Southwest on May 17, 2006. He filed a first amended class action complaint (complaint) on June 1, 2006. The complaint alleged that Southwest sells travel certificates, which are redeemable for airline tickets; drink certificates, which are redeemable for alcoholic beverages on Southwest flights; and vacation certificates, which are redeemable for Southwest vacation packages. Tanen purchased a $100 travel certificate on February 5, 2005, by submitting a completed "SWA Gift Certificate order form" (order form) and credit card information. The order form stated, in relevant part, that " '[a]ll gift certificates expire one year from the date of issue and will not be extended unless prohibited by law.' " Tanen subsequently received a $100 travel certificate, which stated that it expired on "02-07-06." It also stated that " '[t]he certificate must be redeemed and travel must be completed by the expiration date shown on the face of the Gift Certificate' " and the " '[v]alidity period will not be extended.' "

The complaint alleged that under Civil Code section 1749.5, " 'it is unlawful for any person or entity to sell a gift certificate to a purchaser containing an expiration date. Any gift certificate sold after[January 1, 1997] shall be redeemable in cash for its cash value, or subject to replacement with a new gift certificate at no cost to the purchaser or holder.' " Accordingly, the complaint asserted that the expiration of the Southwest travel, drink, and vacation certificates gave rise to the following causes of action: (1) violation of Civil Code section 1749.5; (2) violation of Business and Professions Code section 17200 (prohibiting unfair, unlawful, and deceptive trade practices); (3) violation of Civil Code section 1750 (Consumer Legal Remedies Act); (4) breach of written contract; (5) conversion; (6) fraud, deceit, and/or misrepresentation; and (7) declaratory relief. It sought compensatory damages, restitution, disgorgement, injunctive relief, punitive damages, and attorney fees.

Southwest demurred. It contended that all of Tanen's claims were preempted by the ADA, which preempts any state " 'law, regulation, or other provision having the force and effect of law related to a price, route or service of an air carrier.' " Further, it asserted that many of Tanen's causes of action were not properly pled, section 1749.5 does not provide for a private right of action, and the vacation and drink certificate claims were not properly before the court.

Concurrently with its demurrer, Southwest filed a motion to strike all references to and all causes of action relating to vacation and drink certificates. Southwest asserted that Tanen could not challenge the expiration of vacation certificates because they do not expire. Further, he could not adequately plead causes of action as to vacation or drink certificates because he did not purchase either. Finally, because he never purchased vacation or drink certificates, Tanen did not have standing to raise claims relating to their issuance, nor did he have claims typical of the putative class.

The trial court sustained the demurrer with leave to amend on March 6, 2007. Its order stated as follows:

"The federal Airline Deregulation Act ('ADA')[ ] explicitly preempted any state 'law, regulation, or other provision having the force and effect of law related to a price, route or service of an air carrier.' 49 U.S.C. § 41713(b)(1). Congress intended 'that carriers should not be burdened with conflicting state laws and policies that would have adverse economic consequences on the goal of increasing competition among carriers.' Power Stds. Lab., Inc. v. Fed. Ex. Corp., 127 Cal.App.4th 1039, 1043 (2005).

"In its application of the ADA, the Supreme Court has twice emphasized the broad scope of the preemption provision. The Morales court held that state enforcement actions 'having a connection with, or reference to, airline "rates, routes, or services" are preempted' by the ADA. Morales v. Trans World Airlines Inc., 504 U.S. 374, 384 [112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) ].

"In American Airlines, Inc. v. Wolens, 513 U.S. 219 [115 S.Ct. 817, 130 L.Ed.2d 715] (1995), the Supreme Court addressed ADA preemption regarding an airline's frequent flyer program. The Court held that plaintiffs' claims were clearly related to airline rates and services, and thus, the claims were preempted. Id. at 223-4, 226-28, 234 . The Wolens court affirmed Morales' broad reading of the preemption doctrine, carving out a narrow exception for state-law breach of contract claims that involve a plaintiff seeking to enforce the actual terms of his contract with the airline.

"After these two cases, when 'determining whether a claim is preempted by the [ADA], courts employ a two-prong analysis: (1) whether the subject of the claimhas a connection with or reference to airline rates, routes, or services, and if so, (2) whether the subject of the claim involves the enforcement by the state of a law, regulation, or other provision having the force and effect of law. If both questions are answered in the affirmative, then the [ADA] preempts the claim.' Osband v. United Airlines, Inc., 981 P.2d 616, 619 (Colo.Ct.App.1998).

"Plaintiff's claim that gift certificates relating to the purchase of flights have only a peripheral effect on price is problematic. While the Vacation and Drink Certificates may not directly relate to airline 'rates, routes, or services,' it seems that the Travel Certificates do. Like Wolens, which dealt with frequent flyer credit cards, travel certificates that are used like cash to purchase flights are related to an airline's rates and services. The Travel Certificates in question are at the heart of what the ADA sought to preempt.

"Plaintiff's breach of contract claim alleges that the Travel Certificate states that '[a]ll gift certificates expire one year from the date of issue and will not be extended unless prohibited by law.' Plaintiff notes that California Civil Code § 1749.5 prohibits gift certificates with expiration dates. On April 4, 2006, Plaintiff provided notice to Defendant that Defendant honor the Travel Certificate despite the passage of one year from the time of purchase. Defendant failed to do so and Plaintiff alleges breach of contract.

"Under preemption, Defendant argues that no such legal prohibition existed because state law is inapplicable. As Defendant notes, Plaintiff's challenge to the contract is not based on Southwest's failure to abide by the terms of the contract, but rather, an attempt to use state law to invalidate the contract.

"The thrust of Plaintiff's contract argument is that laws of various states were incorporated into the Travel Certificate by virtue of the language of 'unless prohibited by law.' Because Plaintiff's breach of contract claim rests on the idea that expiration of the Travel Certificate violates state laws, it is inconsistent with the ADA and Congress' intent to remove airlines from the conflicting demands of state regulation. Wolens, 513 U.S. at 222, 228, 230 . Accordingly, all claims concerning Travel Certificates, including a breach of contract claim, are preempted as a matter of law and leave to amend to attempt to state any claim regarding Travel Certificates would be futile.

"Next, because Plaintiff has not alleged that he purchased Drink or Vacation Certificates, he has suffered no damages from their issuance and thus lacks standing to bring his claims. Additionally, Plaintiff's lack of standing forecloses his [Unfair Competition Law] claim in light of Proposition64. Because Plaintiff lacks standing to assert the claims in the First Amended Complaint that arise from Drink and Vacation Certificates, the Court makes no ruling at this time as to application of ADA preemption to claims arising from those Certificates or as to any other challenges to Plaintiff's claims regarding those Certificates apart from standing."

The court sustained the demurrer with 20 days leave to amend, with amendment limited solely to an attempt to state causes of action pertaining to drink and vacation certificates.

Tanen did...